KeySpan's disclosure delays deal
BY MARK HARRINGTON - Newsday - 06-1 1-2007
Long Island Power Authority chairman Kevin Law has put the brakes on LIPA's recently approved service contract with KeySpan and National Grid, expressing "disappointment" over the timing of KeySpan's disclosure that it had received a formal request for information in a federal antitrust probe.
KeySpan released news of the probe hours after LIPA trustees last week voted unanimously to approve the $1 billion-plus contract with merger partners KeySpan and National Grid, even though KeySpan received the request for information from federal authorities a week before.
Both companies have characterized the LIPA vote as an important endorsement in light of what some have portrayed as a sputtering review process for the $11.8-billion merger by the state Public Service Commission, which must approve it.
KeySpan's disclosure, in a filing with the Securities and Exchange Commission Wednesday, said it had received a letter for documents and information from the Department of Justice's antitrust division. Noting that no "specific allegations" have been lodged, KeySpan said in its SEC disclosure that feds are investigating "competitive issues in the New York City electric energy capacity market."
KeySpan is one of three major power generators selling capacity into that market, where questions have arisen about why prices remained at the highest capped levels in a recent period despite a significant capacity surplus, which should have driven prices down.
Law said he would withhold his signature on the contract until he is fully briefed on the implications of the investigation. "I'm upset that information wasn't shared with us prior to the vote," he said, noting that if it had been, "I would have postponed the vote."
He allowed that the matter under investigation "may or may not be serious. Until I know the ramifications it would be premature to sign this agreement."
Officials from KeySpan and National Grid attended the trustees meeting last week, and KeySpan had advance notice of the Justice department's request, receiving the letter on May 31.
KeySpan executive vice president David Manning last week said the letter did not indicate KeySpan was a target of the probe. "They're doing a civil investigation of the New York energy market, and we're a large player. It's that simple," he said.
Law stressed his decision to delay signing the contract was not intended to criticize KeySpan or its officials, "for whom I have tremendous respect."
"If this is truly not something to be concerned about I'll likely sign," he said. "But if that's not the case, I'll likely bring this back before the board for further consideration."
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